When it comes to renewable energy, Colorado politicians are trying to have their cake and eat it, too. In March, the General Assembly passed HB 1001, a law requiring that Xcel use 30% renewable energy for electricity generation by 2020. To be sure, renewable energy is more expensive than conventional energy, but lawmakers promised that the costs would be held in check by a 2 % rate cap codified in the legislation. You see, Colorado politicians believed they could establish a Soviet-style renewable energy production quota AND Soviet-style price controls.
In early September, the Independence Institute’s Amy Oliver Cooke and I took this silliness to task in a Denver Post oped. Specifically, we explained the regulatory machinations employed by the Ritter Administration to get around the rate cap.
Nearly a month later, Rep. Max Tyler, the lead sponsor of HB 1001, replied to our oped with a letter in the Post. Rep. Tyler’s missive ignored our arguments about the price cap, and instead boasted of the ancillary benefits of government picking which energy sources Coloradans must use. Along these lines, he noted that wind power in Colorado:
• Creates more than $2.5 million for farmers and ranchers who lease land for wind generation
• Supports 1,700 construction jobs and 300 permanent jobs in rural areas;
• Generates $4.6 million in annual property tax revenue for local schools, roads, etc.
Of course, Rep. Tyler missed the point: These “benefits” aren’t a net positive for the State. Rather, they are paid for by Xcel consumers, in the form of higher energy bills, which means that Xcel ratepayers (primarily in Denver, Grand Junction, and Boulder) are subsidizing the rural development showcased by Rep. Tyler. This is a classic case of robbing Peter to pay Paul.
In his letter, Rep. Max Tyler stated that, “Colorado currently generates 1,244 megawatts of wind power.” That sounds like a lot, but it’s not. Because the wind doesn’t always blow, Xcel can rely on only a fraction of its wind generation’s nameplate capacity. In practice, 1,244 MW of wind is only 124 MW of real power. That’s about half of the coal power capacity that Xcel agreed to shutter in its most recent electric resource plan.
The problem for Colorado is that this small amount of wind power costs a large amount of money. According to the Public Utilities Staff, Xcel “identified wind energy costs for 2009 of $147,431,000 and 2010 of $155,462,000.” That’s about 5% of Xcel’s 2009 and 2010 sales—or more than double the 2 % rate cap that Rep. Tyler trumpets in his letter (he wrote, “Another important fact: When developing new energy resources, utilities have a 2 percent increase rate-cap on retail customer bills”).
By highlighting localized gains, Rep. Max Tyler missed the big picture. Forcing Xcel customers to pay more for less energy hurts the State’s economy. Period.
William Yeatman is assistant director of the Center for Energy and Environment at the Competitive Enterprise Institute.
 February 4 2010, “Answer Testimony and Exhibits of William J Dalton, Staff of the Colorado Public Utilities Commission,” p 14-15, Docket No 9A-772E